‘Financial Independence’ a State of Mind, not a State of Saving

Allstate Retirement Survey Reveals Three Out of Four Boomers Admittedly Ill-Prepared for Retirement.

Allstate’s 2006 Retirement Reality Check survey shows that 70 percent of Americans polled–regardless of age, gender, household income and education–describe themselves as “financially independent.” But, despite such optimism, 40 percent of respondents admit they are not saving seriously for retirement.

In fact, the sixth-annual survey, which tracks Americans attitudes toward and savings for retirement, reveals that only 21 percent overall—and only 25 percent of Baby Boomers (born 1946-1964)—believe they are “very prepared” financially for retirement. And, overall, 38 percent say they expect their retirement to be “financially difficult.”

Survey respondents also express apprehension about recent trends, such as rising costs of healthcare. Other unplanned factors also hamper America’s retirement dreams. For example, 34 percent of respondents overall—and 43 percent of Boomers—say providing support to adult children has affected their ability to save for retirement. Even 21 percent of Generation Xers (those born from 1965 to 1978) say this.

“It’s remarkable that people can at once declare they are financially independent, yet not be financially prepared for the future,” says Casey Sylla, president, Allstate Financial, a subsidiary of Allstate Corp. “A sobering finding is that the generation least likely to deem themselves financially independent are those age 45-54, which suggests that as people near retirement age some reality is setting in. The key is for that reality to lead to action.”

Age Matters

Age clearly plays into how individuals answered. Respondents age 25-34 are most likely to define financial independence as “not having to rely on others for money” (32 percent). Thirty-one percent in this age group said “having enough money to live without hardship” and a presumably less short-sighted 15 percent responded that financial independence is “having enough money to last as long as you live.”

One unexpected finding is that Generation X respondents are more likely than their elders to describe themselves as financially independent—73 percent of Gen-Xers compared with 67 percent of Baby Boomers. And while there is no significant difference among male respondents (70 percent) versus females (69 percent), Gen-X males are the most optimistic of all, with 76 percent saying they are financially independent.

Among respondents age 55 and older, financial freedom means “having enough money to live without hardship” or “to last as long as you live, no matter what occurs.” Both were cited by 26 percent, and “not having to rely on others for money” was noted by only 19 percent.

Indeed, the 2006 survey shows that the majority of respondents—regardless of age, gender, income or education—consider themselves to be disciplined, good savers and good shoppers. They say they stick to a budget and balance their checkbooks regularly.

“These findings suggest that when people look at their financial situation, they focus on how they’re able to handle their current expenses, not on long-term or retirement savings,” said Mathew Greenwald, Ph.D., president of Mathew Greenwald and Associates Inc., the Washington, D.C. firm that conducted the survey for Allstate.

A Need to Act

So what will get people to save for retirement? Survey respondents ranked having a company payroll-deduction plan as the biggest incentive (34 percent), followed by being better educated about investments (29 percent). And 52 percent said that media coverage of retirement issues prompts them to think about it.

“It’s as if people are saving from the neck on up—they think about it, they feel good about it, but they don’t actually do it,” adds Sylla. “It’s important to discuss and think about saving in a manner that actually drives action.”

Allstate created the sixth-annual Allstate "Retirement Reality Check" survey in conjunction with Mathew Greenwald & Associates. Using a random digit dialing methodology, Greenwald & Associates polled 1,603 people born between 1946 and 1978, with household incomes of $35,000 or more. Retirees were accepted with incomes of at least $20,000. The margin of error (at the 95 percent confidence level) for the total number of respondents in this study is ±2.5 percent, ±3.8 percent for information specific to Gen Xers, ±4.5 percent for Baby Boomers, and ±5.0 for Silent Generation.

Now celebrating the 75th anniversary of the founding of Allstate Insurance Company, The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,100 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. EncompassSM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.